airBaltic flight cancellations have been blown out of all proportion for political reasons - Gauss

RIGA - The fallout from the announcement by Latvian national airline airBaltic about the cancellation of almost 5,000 flights has been blown out of all proportion for political reasons: the airline's plan A is to organize an initial public offering (IPO) this year and attain results that would not require additional investment in the airline from the state, as airBaltic CEO Martin Gauss told LETA.

Commenting the fact that the ruling coalition parties will later on Monday discuss replacing airBaltic management, Gauss said, "The claims for the suspension of the CEO of an international airline due to flight cancellations go to show that this is a politically motivated act".

Gauss has been an aviation professional for many years, he said. "I can run an airline, but I am not a politician and I will not go into politics. However, I certainly respect decisions that affect me," said Gauss.

Gauss, who was appointed airBaltic CEO 13 years ago, believes that he has done a good job in creating the region's largest airline and one with the most modern fleet, while five airlines went bankrupt in the three Baltic countries during that time.

airBaltic is planning to go public and attract private capital so that the state will no longer have to invest in the company, stressed Gauss.

Commenting on a statement by Economics Minister Viktors Valainis (Greens/Farmers) that airBaltic needs new management, Gauss said that he had spoken to the minister just once. He has been informed that Valainis and the Greens/Farmers said that they had lost confidence in Gauss.

"If the government and the public want me to leave, I will. I am not a politician. I do not take decisions on this matter. I am doing everything in my power to run this company in a professional way," said Gauss.

The recent developments will have serious repercussions for airBaltic, said Gauss.

The current airBaltic shareholders are the Latvian state and a minority shareholder, while the company's supervisory board makes sure that Gauss is doing his job right, he explained.

Now a decision from the ruling coalition's meeting has to be awaited, said Gauss, adding that he had 34 years of experience in international aviation management and his work was internationally acclaimed.

At the beginning of January, airBaltic supervisory board chairman Klavs Vasks said that current bond liabilities and interest rates cannot ensure a sustainable long-term operation of airBaltic, which means an additional capital injection from the state is likely to be unavoidable.

In Gauss' opinion, Vasks was trying to make the point that the airline was at a stage where it was planning an IPO later this year, and therefore needed clear direction and oversight.

"Only if that direction is not clear and the airline fails in something, for example, in raising private capital, only then could it approach its shareholder. I believe this is what Vasks meant," said Gauss.

airBaltic aims to develop a budget and a business plan, and to implement them without the government's involvement. "That is my task, and that is what we are trying to do," Gauss added.

Plan A is to organize an IPO this year and deliver the expected results, in which case airBaltic will not have to turn to the government, Gauss stressed.

"If we cannot organize an IPO this year, it would be postponed until 2026," said Gauss. "And in the meantime, if planning, economics or other things are not done right, we will act to adapt, just as we have been doing for the last 13 years. The shareholder will always be involved in this decision-making, and the shareholder will decide that direction," said Gauss.

As reported, performance of the supervisory board of national airline airBaltic will be evaluated at the company's shareholders meeting on January 21.

Transport Minister Kaspars Briskens (Progressives) stressed that airBaltic is a strategically important company for the country, which contributes directly not only to the aviation industry, but to the entire Latvian economy. In order to ensure continued growth of the airline, the company's management has pledged to raise EUR 300 million for implementation of the airline's business plan.

"People have to keep their promises and, if circumstances change, always have a clear plan B. We judge the work of the supervisory board and, in particular, its chairman, Klavs Vasks, based on results, correct and timely communication, and the ability to manage the company even in challenging times," said Briskens.

airBaltic has announced that it will cancel 4,670 flights from all its bases for the summer season 2025.

The cancellations are a result of unexpected delays and prolonged engine maintenance by its supplier, Pratt & Whitney. The engine manufacturer's inability to meet its timely maintenance obligations has impacted the operational capabilities of airBaltic's Airbus A220-300 fleet, forcing the airline to adjust its summer schedule.

After this announcement, Briskens said on X that the Transport Ministry has instructed the supervisory board of national airline airBaltic to promptly explain the airline's decision to cancel a number of flights and its impact on Latvia's connectivity.

At the same time, Briskens reminds that the management of airBaltic - including Gauss and Vasks - must keep their promises to raise EUR 300 million to implement the company's business plan and to ensure that airBaltic's activities are in the interests of the state of Latvia and passengers.

It has also been reported that the share capital of airBaltic will be reduced by EUR 571.293 million in preparation for an initial public offering (IPO), the government decided at a closed cabinet sitting on August 30, 2024.

The terms of the share capital reduction state that airBaltic's current share capital is EUR 596.473 million, which means that after the planned reduction it will be EUR 25.179 million.

The company's share capital currently consists of 25,647,282 Class A shares with a nominal value of EUR 10 each, 74,323,152 Class B shares with a nominal value of EUR 3 each, 113,164,518 Class C shares with a nominal value of EUR 1 each, and 38,660,300 Class D shares with a nominal value of EUR 0.1.

As it prepares for the IPO, airBaltic has decided to simplify its share structure. As a result, the nominal value of all Class A, B and C shares will be reduced to EUR 0.1 and EUR 571.293 million will be allocated to offset accumulated losses from previous years. Shareholders will not be paid any remuneration or compensation in connection with the reduction in the nominal value of these shares.

Thus, the share capital of airBaltic after the reduction will be EUR 25.179 million, consisting of 251,795,252 dematerialized shares with a nominal value of EUR 0.1 per share. Each share will entitle the holder to one vote at the company's shareholders' meeting, a dividend and a liquidation allowance.

Briskens said earlier that the talks with airBaltics' strategic investor are not being held to sell a controlling stake but that the plan is to sell a minority stake in preparation for the IPO.

Bloomberg news agency reported, citing people familiar with the matter, that German national airline Lufthansa is considering taking a stake in airBaltic ahead of the Latvian state-owned carrier's proposed IPO.

Briskens has not yet officially disclosed whether the potential strategic investor is Lufthansa, as well as how many shares in airBaltic could be sold to the investor and for how much. "Work is ongoing. There must be a mutual agreement to disclose such information. As soon as the transaction documents are finalized, both sides will immediately comment on it," the minister said earlier.

At the same time, Briskens stressed that the responsibility for the capital increase lies with airBaltic CEO Martin Gauss and Vasks. "The performance of the company's management will be evaluated on the basis of the results achieved," the transport minister said.